Under the agreement - the biggest of its kind in the EU - Philip Morris, which manufactures the Marlboro, L&M and Chesterfield brands, agreed to pay the money in varying amounts over 12 years in return for an end to litigation on both sides.

The cash will go to the EU budget and the 10 countries that joined the EU lawsuit against the company to finance the fight against contraband cigarettes.

Britain, however, is not included in the 10 countries - which are Belgium, Finland, France, Germany, Greece, Italy, Luxembourg, the Netherlands, Portugal and Spain - a point underlined by the tobacco control campaign group ASH (Action on Smoking and Health).

Deborah Arnott, the group's director, said: "ASH demands to know why the UK did not take part in the legal action taken out by the EC against Philip Morris.

"We are the victims of some of the highest levels of smuggling in Europe, with tax unpaid on one in four cigarettes consumed in this country. Our citizens need the protection of this agreement, and our government must sign up to it as soon as possible.

"We also call on the government to re-open negotiations with BAT, Gallaher and Imperial immediately and to accept nothing less than the terms of the Philip Morris agreement with the European commission."

Civil lawsuits filed in New York accused the company of complicity in smuggling Marlboro and other brands into the EU - where cigarettes are generally heavily taxed - by intentionally oversupplying countries with lower duties.

The surplus would then allegedly be smuggled into EU countries and sold on the black market, depriving governments of tax and customs revenue.

Philip Morris has strenuously denied the charges. However, part of today's agreement requires the company to make sure sales volumes are "commensurate with legitimate market demand".

It also provides for additional, unspecified payments to the EU "in the event of future seizures in the [EU] of its genuine products above defined quantities".

"This cooperation agreement represents a major step forward against the common enemy of counterfeit and contraband cigarettes," Andre Calantzopoulos, the chief executive of Philip Morris International, said.

"The efforts of Philip Morris International, along with those of governments in the EU, to prevent the diversion of cigarettes into contraband channels, have borne fruit."

Last year, 20 million counterfeit Marlboro cigarettes were confiscated and destroyed in Kosovo alone. Groups ranging from Vietnamese gangs in eastern Germany to paramilitaries in Northern Ireland have profited from the black market in cigarettes.

In the US, federal authorities last February arrested 10 people in five states for smuggling more than 100m fake cigarettes from Asia into the US. In Washington, senator Ron Wyden and house member Lloyd Doggett said they would soon introduce legislation on tobacco labelling, tracking and reporting incorporating some of the provisions laid down in today's deal.

Requiring unique identifiers on cigarette packaging would help make sure cigarettes "arrive at their intended destination and not in the back of a truck profiting smugglers or potentially funding terrorism", Mr Wyden said in a statement.

The European commission said it was ready to strike similar agreements with other cigarette makers. "We are ready to negotiate with other manufacturers," Michaele Schreyer, the EU budget commissioner, said.

The European commission has waged a long-running lawsuit in US courts, and had accused Philip Morris, along with rival RJ Reynolds, of colluding in smuggling cigarettes to evade EU customs and taxes.

The outline of an accord between the EU and Philip Morris was first aired in April.